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Downsizing Blog

A computer glitch in the Federal Aviation Administration’s national air traffic control system caused delays and cancelations last Thursday. A spokesperson for the air traffic control employees union called it a “nightmare.” Sen. Charles Schumer (D-NY) said the nation’s ATC system is “in shambles” and called for more “resources, manpower, and technology” for the FAA.

The Taxpayers’ Alliance has published a new study examining a sample of 240 government capital projects in Britain, including weapons systems, highway projects, computer upgrades, health care spending, and other items. The results mirror the serious cost overrun problems we have in the U.S. federal government.

The Obama administration and its allies in Congress want the federal government to expand its role in subsidizing health care. We are told that this expansion will restrain rising health care costs. But an OMB report yesterday that the government made $98 billion in improper payments last year – $55 billion of which came from Medicare and Medicaid – ought to raise suspicions about that claim.

The U.S. Postal Service reported that it lost $3.8 billion last fiscal year and that it expects to lose $7.8 billion this year. The loss occurred despite cost-cutting measures and legislation that allowed the USPS to forgo $4 billion in required payments to pre-fund retiree health benefits.

The recession has given the government an excuse for major interventions into markets, and the word “bailout” is found in business section almost daily. While there are justified concerns over government bailouts of large corporations, big businesses cashing in on the economic stimulus plan have flown below the radar.

From the standpoint of Americans who prefer less government, one of the worst developments of the 20th century was the federal subsidization of state and local spending. The result has been bigger government at all levels. Medicaid represents the largest portion of federal money to the states. The states administer their own Medicaid programs, but the federal government picks up 50 to 83 percent of the tab depending on a state’s income. The estimated price tag of the federal share for fiscal year 2009 is $260 billion.

The Wall Street Journal is reporting that Fannie Mae and Freddie Mac, which have already consumed $112 billion in taxpayer bailouts, may have additional losses if they can’t recoup claims from struggling private mortgage insurers.

The HUD Inspector General’s Office released an audit earlier this week on the department’s progress in making sure local public housing agencies aren’t subsidizing the deceased. According to the report, local “agencies made an estimated $15.2 million in payments on behalf of deceased tenants that they should have identified and corrected.”

Over the past decade, the Federal Housing Administration has been insuring riskier mortgages in an attempt to regain “market share” lost to private competitors during the housing boom. But after the housing bubble burst and private firms either went out of business or reduced their risk profile, the FHA continued to plow ahead insuring risky mortgages. This could all backfire on taxpayers.

The New York Timesreports on the internecine fighting among high-speed rail lobbyists. At stake is $8 billion in stimulus money that the Obama administration views as a down payment on a nationwide high-speed rail network. As the Times notes, “Nothing stirs passions for a massive public-works project like a wad of federal cash.”